There Was No Tariff Front-Running?

Diving Into UK Trade Figures

US Tariffs. Again.

Sorry we have to do this but tariffs remain the key source of global macro uncertainty.

So we need to talk about them.

The good thing about now compared to a few months ago is that we actually have some decent data, so we are pontificating less (we are still pontificating a lot).

And that data is weird.

Today we’re going to get a handle on tariff front running in the UK. Q1 GDP came in quite strong at 0.7% q-o-q, with a substantial (0.34pp) positive contribution from net exports.

A Q1 jump in exports has driven elevated growth in many markets, which is likely to be given back to a certain extent.

There are a few mechanisms in play here that mean that tariffs will likely be a drag on GDP growth for country’s which export to the US:

1) A US importer who front ran tariffs and built up inventory will not keep adding to inventory once tariffs are in place. This will result in lower imports.

2) The tariff (10% for the UK, with some exemptions) will likely result in a reduction in export volumes to the US as imported products are less price competitive versus domestically produced products.

3) The macro backdrop in the US has deteriorated, leading to a lower level of demand (final sales to private domestic purchases slipped from its annualised run rate of just under 3.0% in 2024 to 1.9% in Q1 and 1.2% in Q2). Tariffs weigh specifically on imports, lower demand weighs on all consumption.

4) The headwinds emanating from the US will likely trigger a slowdown globally, which will weigh on global import demand, impacting exports to all countries.

5) Increased uncertainty is weighing on investment intentions and encouraging precautionary behaviour among households (e.g. a higher savings rate).

6) A deterioration in the global risk backdrop (which is doing surprisingly well) would weigh on risk taking.

We’re going to focus on 1.

Tariff Front-Running & UK Exports

Goods exports are not as important to UK GDP than in many other markets. Goods exports of GBP366bn in 2024 constituted 41.9% of total exports, making up just less than 13% of GDP. Nevertheless, they can still swing headline GDP significantly and shocks to goods exports can reverberate through the economy (e.g. via the labour market).

By export destination, the EU is by far the largest source of demand for UK goods, while the US is second.

Diving into monthly figures (to May), we can see quite clearly that there was significant jump above trend in exports since November (when Trump was elected). In April – the first month that tariffs had been introduced – total goods exports plummeted to pandemic era levels, dropping GBP2bn or by around a third.

We can see quite clearly in the data that this pattern is due to shifts in exports to the US:

The big question remains just how much front running there was, and to what extent it still needs to be given back. To estimate this, we can consider the pre-November trend in goods exports to the US and compare the actual figures to this. The differential between the trend and the actual number will give us a rough estimate of how much front running there was in that month, and if we sum these figures since November, we will have a “front running balance”, which will need to be worked down to zero over the coming months.

At its peak in March, the front running balance came in at GBP2.5bn, around 0.08% of UK 2024 GDP. This has fallen to GBP0.7bn or 0.02% of GDP per the latest data released in May.

Where things get really interesting is when we consider the breakdown of goods exports to the US. Our GBP0.7bn balance masks some weird trends under the hood. Per the chart below, our balance is actually constructed of some significantly below trend exports of fuels, chemicals, and machinery & transport equipment, while a single category constitutes pretty much all the front-running at GBP4bn – material manufacturers. These are creation of materials that are generally inputs into manufactured products, e.g. manufacture of leather, wood, rubber, and textiles.

The mad thing is that the GBP4.0bn of above trend exports in this category is almost the equivalent of the entire material manufacture goods to the US in 2024 of GBP4.7bn.

It gets weirder. Of that GBP4.0bn, the entire balance is exports of non-ferrous metals. That’s right, the only UK export that has been front run has been non-ferrous metals. And the amount of front-running has been insane. The UK exported GBP1.5bn of non-ferrous metals to the US in 12 months to November (before the front running started). Over December to May, this came to GBP4.7bn.

This becomes super clear as soon as we breakdown the export data like this:

And what exactly are non-ferrous metals? Asking new Google:

We don’t have a breakdown of non-ferrous metals exports, so we have to do some digging. We do have the GVA category for basic metal and metal products. Per our AI assistant, “Basic metals include iron, steel, aluminum, and copper, while non-metals include materials like plastics, ceramics, and rubber.” i.e. no precious metals. We have seen basic metals and metal products output fall sharply over recent months per the chart below, implying that the entire front running of goods exports to the US has likely been precious metals.

And we can check this with TradeMap data, which confirms a huge jump in gold exports to the US.

Tying this all together, on the surface, there appears to have been really significant front-running of tariffs by US firms from the UK since November. However, the data tells us that this was completely in non-ferrous metals trade, which we further found was completely down to gold exports. In fact, exports have been running below trend in several major export categories for months, including fuels, chemicals, and machinery & transport equipment.

The figures suggest that we have not really seen any net tariff front-running across the economy. Furthermore, considering impacts on GDP, the gold trade is largely GDP neutral, suggesting that this front-running will not have had a massive impact on activity in Q4 or Q1, also suggesting that as front-running is reversed, there will not be a drag on GDP.

However, there is little consolation here. We should not be distracted by the elevated exports from Q4 and Q1 given they have been distorted by the gold trade. Instead, we should be worried about the poor performance for several export types, even as it would have made sense for US importers to front-run the tariffs.

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This newsletter is for informational purposes only. It does not constitute investment advice or an offer to invest. The views expressed herein are the opinions of JB Macro exclusively. Readers should conduct their own research and consult with professional advisors before making any investment decisions.